EU and World Agricultural Markets: Are They more Integrated after the Fischler Reform?
This work uses cointegration techniques allowing for structural breaks to assess the extent to which the Fischler reform of the CAP increases price transmission elasticity (PTE) between the world and European corn, wheat, and soybean markets. Results show that the reform increased PTE in the case of corn and wheat, while its impact was negligible for soybeans. However, the long-term relationship (cointegration) between world and European prices can be detected only taking into account – other than the Fischler reform’s structural break – also the fact that world commodity markets were interested, in 2003-04 and 2007-08, by price bubbles. In particular the latter affected the world – European corn price relationship in the ascending phase, while the wheat and soybeans markets in the descending phase.
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